The survey of 251 HR and payroll managers in private sector companies with 1,000 employees or more was commissioned to assess the effectiveness of payroll.
More than three-quarters (76%) of companies admitted to failing to pay their employees correctly or on time on one or more occasions in the past year. On average respondents revealed that employees had been paid incorrectly or late four times in the past 12 months.
More than a quarter (27%) admitted errors or late payments had occurred one to three times in the past 12 months. More than one in 10 (12%) paid employees incorrectly or late seven to nine times, with the worst offenders (8%) confessing to doing so more than 12 times.
The inability of HR and payroll teams to deliver accurate and punctual payments is compounded by poor use of technology, the research suggested. More than half of large organisations still use spreadsheets (52%) as part of their payroll process, and 34% rely on paper timesheets.
When asked why their organisation used methods open to errors and miscalculations, more than half of respondents using spreadsheets (62%) and paper (58%) said it was because it had always been done that way.
David Crewe, head of service operation for outsourced payroll at MHR, said that outdated processes can cause employees to struggle with their finances. “Our research shows that bigger isn’t always better; with a widespread failure of some of the UK’s largest and most successful organisations to modernise their payroll process. Worryingly many are still using outdated manual processes for gathering and inputting data, resulting in an awful lot of people suffering from incorrect pay,” he said.
“This can have a profound impact on people; not only affecting their ability to pay bills on time but also their overall wellbeing, morale and productivity, which over time can force them to leave their jobs."
Crewe said that employers must urgently look to digital transformation of their payroll processes, particularly in light of HMRC's Making Tax Digital initiative which aims to implement of a fully digitalised tax system by 2020.
“The responses to the survey highlight that organisations are either blind to the problems their HR and payroll teams face, reluctant to change their way of working, or simply don’t have the time to undertake a digital transformation project to fix the problem," he said.
“With payroll professionals already facing many arduous tasks and under pressure to meet compliance obligations to ever-changing employment legislation, it’s inconceivable that organisations of this size can even consider doing their payroll manually rather than with a secure automated system.
“With government plans to make tax fully digital already underway, the sooner organisations introduce new digital ways of working the better.”